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Solicitor General responds to the Court’s invitations

It’s a sure sign that the end of the Term is drawing closer:  briefs filed by the Office of the Solicitor General, at the Court’s invitation, expressing the views of the United States in cases in which the Court is considering whether to grant review.  Submitting the briefs in mid- to late May gives the Justices an opportunity to consider them and decide whether to grant review in the cases before their summer recess.  On May 23 and 24, the federal government filed five such briefs, recommending that certiorari be granted in three cases.  (In a brief filed on May 20, the government also recommended that the Court grant review in Fry v. Napoleon Community Schools; I discuss that case in more detail in a post on my own blog.)

Bolivarian Republic of Venezuela v. Helmerich & Payne International arises out of Venezuela’s 2010 nationalization of property owned by Helmerich & Payne’s wholly owned subsidiary, which was incorporated under Venezuelan law.  Helmerich & Payne filed a lawsuit seeking redress in a Washington, D.C., federal district court.  The Foreign Sovereign Immunities Act generally bars lawsuits against foreign states in U.S. courts, but the “expropriation exception” to the FSIA allows lawsuits when (among other things) “rights in property taken in violation of international law are in issue.”  Venezuela has asked the Justices to review the D.C. Circuit’s ruling that Helmerich & Payne’s lawsuit against it can go forward because the company’s expropriation claim is not frivolous.  The federal government agrees with Venezuela that the Court should take on one of the questions presented in Venezuela’s petition for certiorari:  whether the appropriate pleading standard for a claim that the expropriation exception applies is whether the claim is “wholly insubstantial or frivolous,” or whether a more demanding standard applies.  The courts of appeals are divided on that question, the government tells the Court, and allowing that conflict to continue could encourage forum shopping.  However, the government continues, the Court should not take on the other two questions presented by Venezuela’s petition, which ask the Court to review the merits of the lower court’s holding that Helmerich & Payne’s allegations are not frivolous.

A petition filed by Helmerich & Payne, challenging a different part of the lower court’s ruling, does not fare as well:  the federal government recommends that review be denied in Helmerich & Payne International v. Bolivarian Republic of Venezuela.  In this case, Helmerich & Payne contends that Venezuela’s state-owned oil company breached ten drilling contracts with its Venezuelan subsidiary.  Moreover, it argues, U.S. courts have jurisdiction under the FSIA’s “commercial activity” exception, which (among other things) allows lawsuits based on conduct that takes place outside the United States “in connection with a commercial activity of a foreign state” and causes a direct effect in the United States.  The district court agreed that the exception applies, but the court of appeals reversed.  It ruled that Helmerich & Payne could not rely on either its contracts with U.S.-based suppliers to obtain the parts it needed for its Venezuelan contracts or the fact that Venezuela’s state-owned company had made payments on the contracts to a bank account in the United States.  The Solicitor General tells the Court that review is not warranted because the lower court’s decision is correct and there is no split among the circuits on the issues presented in the case.

The federal government recommends that review be denied in Odhiambo v. Republic of Kenya, another case involving the FSIA’s “commercial activity” exception.  The plaintiff in the case, Peter Odhiambo, worked as an auditor for a Kenyan bank and provided the Kenyan government with information about possible tax evasion by the bank’s accountholders.  In return, the Kenyan government gave Odhiambo nearly six thousand dollars, under a program that offered a reward for information about tax evasion, and Odhiambo later shared the information with a Kenyan newspaper.  Odhiambo received asylum in the United States, where he filed a lawsuit in federal district court, seeking thirty million dollars in damages.  He contended that Kenya had breached its contract with him when it failed to pay him money that he was owed and revealed that he was a whistleblower.   The district court dismissed the case.  It reasoned that, even if Kenya’s conduct was commercial activity, the commercial-activity exception still did not apply because the acts that formed the basis for Odhiambo’s breach-of-contract claims did not have the required nexus to the United States.  The court of appeals affirmed.  The federal government tells the Court that review is not warranted because the decision of the court of appeals is correct, and there is no conflict among the courts of appeals.  Moreover, the question on which Odhiambo focuses – whether the meaning of “substantial activity” for purposes of the commercial-activity exception mirrors that of the phrase “minimum contacts,” for purposes of personal jurisdiction – is neither properly before the Court nor the subject of a circuit split.

With the federal government having recommended that review be granted, Lightfoot v. Cendant Mortgage Corporation might also find a place on the Court’s merits docket for the fall.  The case stems from a real estate foreclosure, which prompted a lawsuit against (among others) Fannie Mae in California state court.  Fannie Mae removed the case to federal court, arguing that a clause in its charter authorizing it to sue and be sued “in any competent jurisdiction, State or Federal” created federal subject matter jurisdiction.  Although the procedural history of the case borders on byzantine, the question it now presents is relatively straightforward:  whether the sue-and-be-sued clause in Fannie Mae’s charter confers original jurisdiction over all suits in which Fannie Mae is a party.  The Ninth Circuit ruled that it does, but the federal government disagrees.  It concedes that, for a federally chartered entity, Congress can create federal jurisdiction in a sue-and-be-sued clause if it specifically refers to federal courts.  But here, it maintains, Congress’s use of the phrase “of competent jurisdiction” “suggests that the charter does not provide an independent basis for federal or state jurisdiction, but simply authorizes Fannie Mae to sue or be sued in any court for which some other jurisdictional basis exists.” The government acknowledges that there is no split among the lower courts on this particular question, but it adds that there is a conflict on the meaning of similar sue-and-be-sued clauses in the charters of other institutions.

The third recommendation that review be granted comes in Czyzewski v. Jevic Holding Corp., a bankruptcy case.  Jevic, a trucking company, filed for bankruptcy under Chapter 11 of the Bankruptcy Code.  Under Chapter 11, a plan for bankruptcy is created; it assigns claims to a particular class and indicates how each class of claims will be treated. The petitioners in this case, truck drivers who had worked for Jevic, filed a lawsuit alleging violations of state and federal employment laws. The bankruptcy court agreed with them, resulting in a priority wage claim of just over eight million dollars.  A committee of unsecured creditors also filed a suit, against two entities that held liens on Jevic’s assets.  When the entities filed a motion to dismiss, the bankruptcy court granted it in part and denied it in part. The committee, Jevic, and the entities reached a settlement agreement that would (among other things) resolve all of their claims against each other and pay various legal fees. The truck drivers opposed the settlement, however, because it did not include any payments to them — even though, under the Bankruptcy Code, they should have been a higher priority for payment than some of the other creditors who could receive payments under the proposed settlement.  The bankruptcy court approved the settlement, explaining that because there was “no prospect of a confirmable plan being filed,” the Bankruptcy Code’s priority rule “is not a bar to approval.”  The district court and the court of appeals affirmed that ruling, with the court of appeals dubbing the settlement “the least bad alternative.”  Now the federal government is urging the Court to weigh in, telling the Justices that the decision exacerbates a division among the courts of appeals on whether a bankruptcy court can approve “a proposed ‘settlement’ that distributes estate assets in a manner inconsistent with the Bankruptcy Code’s priority scheme” when there is an objection from a priority claimant whose rights the settlement would impair.  The lower courts in this case, the federal government adds, answered that question – which it argues is important and recurring – incorrectly.

The parties in each of these cases have the opportunity to file briefs responding to the federal government’s views.  The Court is likely to act on the petitions for review before its summer recess begins in late June.

Recommended Citation: Amy Howe, Solicitor General responds to the Court’s invitations, SCOTUSblog (May. 29, 2016, 4:14 PM),